What Economics Teaches Us About Humanity

F.A. Hayek once said:

Nobody can be a great economist who is only an economist – and I am even temped to add that the economist who is only an economist is likely to become a nuisance if not a positive danger.

I argue this is very true (personally, I like the interaction between law and economics), but the opposite is true as well: economics can teach a lot of other disciplines, too.  The economic way of thinking, properly understood and applied, can provide many great insights.  Further, I am not talking about applying some of our more extreme assumptions and models, but rather just one particular assumption: people are, generally speaking, rational (that is: they move toward a specific goal).

The assumption of rationality can lead to some very interesting (and sometimes uncomfortable) questions.  For example, we often see people taking extreme risks to leave socialist/communist countries: crossing shark-invested oceans, climbing barbed-wire walls, risking execution or torture, cramming themselves into hot shipping crates or under bushes of hay, etc.  If we assume rationality, it leads us to the question: “What are conditions like in those countries where these risks are acceptable?”

The assumption of rationality also helps us reject some of the more silly arguments that can lead to bad policy.  For example, a common argument from the Right is that immigration must be restricted because immigrants vote Democrat and therefore they want to recreate the socialist Hellholes from whence they came.  The assumption of rationality leads us to question that claim: if they wanted to recreate socialism, why did they leave their socialist world to begin with?  It’d be irrational.  Could not a better explanation of immigrant voting patterns be simply the Democrats don’t treat them with outright hostility (but rather mask their hostility behind pleasant-sounding schemes like minimum wage)?

My professor Walter Williams likes to say never to assume someone is an idiot unless they prove themselves so.  The assumption of rationality helps prevent us from making this mistake.

One thought on “What Economics Teaches Us About Humanity

  1. “My professor Walter Williams likes to say never to assume someone is an idiot unless they prove themselves so.”

    That is true. However, the vast majority of people are not idiots. Unfortunately, many want to prove themselves so, if not for all times, then at least for a particular conversation involving economics.

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